Bitter end for Hostess OK’d in bankruptcy court

CEO sees strong interest in brands as thousands await pink slips

By

SteveGelsi

NEW YORK (MarketWatch) — Hostess Brands Inc. has seen a “flood of inquiries” in its brands, the company said during a bankruptcy-court hearing on the snack maker’s plan to liquidate and cut thousands of jobs, following the failure of last-ditch mediation.

Reuters

In a bitter end for the maker of Twinkies and Wonder Bread, the U.S. Bankruptcy Court for the Southern District of New York approved the company’s motion “for the orderly wind-down of its business and sale of its assets.”

Hostess Brands said it intends to retain approximately 3,200 of its employees to assist with scaling down operations, in a process expected to take a year.

Hostess will close 33 bakeries, 565 distribution centers, about 5,500 delivery routes and 570 bakery outlet stores, as well as cut 18,500 jobs.

“Employee head count is expected to decrease by 94% within the first 16 weeks of the wind down,” according to the company.

Ahead of the hearing in bankruptcy court in White Plains, N.Y., Hostess Chief Executive Gregory Rayburn told Bloomberg TV that the Irving, Texas-based company has received interest in buying some of its brands from rival food makers and private-equity firms.

But he warned that any buyer will be unlikely to pick up the entire company and keep all its operations open, in a blow to job prospects for Hostess workers.

Meanwhile, shares of Flower Foods Inc.
FLO, +0.00%
rose 3.4% Wednesday on speculation that the maker of Nature’s Own bread and snack cakes may bid for Hostess assets. In April 2011, Flower Foods bought Tasty Baking Co. for $165 million in cash.

Precipitating the liquidation plans, Hostess failed to reach a contract agreement with the Bakery, Confectionery, Tobacco and Grain Millers Union, which represents 5,600 workers at the company.

In a brief statement late Tuesday, the company said mediation proved unsuccessful. Bankruptcy Court Judge Robert Drain had asked the two sides to meet Tuesday prevent a shutdown of the 82-year-old business.

Hostess chief Rayburn said some members of the bakers’ union had heard that Mexico’s Grupo Bimbo SAB de CV
BIMBOA, +0.26%
would buy the company. However, such a transaction could not gain antitrust approval because that firm recently closed on the purchase of bakery assets from Sara Lee Corp., he added.

Fluff divides families and casseroles

(5:37)

Among the kitchen-table issues dividing households during the Thanksgiving holiday, perhaps none is so sticky as whether to Fluff the sweet-potato casserole. (Photo: Alex Gagne for The Wall Street Journal.)

The Teamsters union had approved a pay package with Hostess, but the bakers’ union didn’t go along with it.

“Demand hasn’t been our problem. ... The problem was always the cost structure,” Rayburn said. “We gave [it] every shot we could. The lenders tried to do everything they could. The Teamsters did everything they could to give this company a chance to survive. We just couldn’t convince the bakers.”

The fondness for Hostess extended beyond baby boomers. Comedian Jimmy Fallon joked that Pabst Blue Ribbon beer may buy Hostess and start making Twinkies. “Yeah, beer and Twinkies — or as I called that in college, ‘brunch,’“ Fallon wrote on Twitter.

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